Crombie REIT Announces First Quarter 2021 Results

·14 min read

Positive short-term and long-term results driven by completed development projects, stable grocery-anchored portfolio, and solid financial condition

NEW GLASGOW, NS, May 5, 2021 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its first quarter ended March 31, 2021. Management will host a conference call to discuss the results at 11:30 a.m. (EST), May 6, 2021.

Crombie REIT Logo (CNW Group/Crombie REIT)
Crombie REIT Logo (CNW Group/Crombie REIT)

"Despite the challenging environment of the third wave of COVID-19, Crombie continues to display extraordinary stability and achieve sustainable growth," said Don Clow, President and CEO. "I am grateful for the health of our team and the empathy and support they have demonstrated to our tenants and communities. Our real estate fundamentals and financial performance are strong, our balance sheet is solid and improving, and our net asset value (NAV) creation is increasing with the completion of our major developments including our first mixed-use development, Zephyr, at Davie Street in Vancouver and our investments in Empire's competitiveness."

FIRST QUARTER SUMMARY
(In thousands of CAD dollars, except per unit amounts and as otherwise noted)

Operational Highlights

  • Strong committed occupancy of 96.3% and economic occupancy of 95.5%

  • Renewals of 387,000 square feet at rents 3.0% above expiring rates

  • First quarter 2021 rent collected 98%; April 2021 98%

  • Substantial completion reached at Davie Street Residential

Financial Highlights

  • Property revenue of $103,537

  • Operating income of $33,215

  • AFFO $0.25 per unit; AFFO payout ratio 90.8%

  • Same-asset property cash NOI increase of 2.2% (SANOI +3.8% normalizing for COVID-19 impacts)

  • Debt to gross fair value of 48.9% (48.3% net of cash)

COVID-19 IMPACT

Crombie is well-positioned with respect to the defensiveness of annual minimum rent (AMR):

  • 82% of AMR is generated from grocery and pharmacy-anchored properties which includes retail-related industrial

  • 69% of AMR is generated from essential services tenants

  • 7% of AMR is generated from small business tenants

During the three months ended March 31, 2021, 98% of gross rent was collected with rent collections for the month of April remaining constant at 98%. Crombie has actively supported our tenants during this challenging time through the Crombie Values Small Business program, the Federal government's Canada Emergency Commercial Rent Assistance program, the Canada Emergency Rent Subsidy, and mutually beneficial agreements with other tenants. In the first quarter, a bad debt expense of $648 was recognized. Continuing uncertainty with respect to the severity, duration and overall impacts of the pandemic mean that forward-looking forecasts of operating and financial results for Crombie are uncertain at this time.

Parking revenue remained depressed during the quarter as a result of reduced demand due to COVID-19.

Crombie ended the quarter with $469,548 in available liquidity from undrawn credit facilities.

Information in this press release is a select summary of results. This press release should be read in conjunction with Crombie's MD&A for the quarter ended March 31, 2021 and Consolidated Financial Statements and Notes for the quarters ended March 31, 2021, and March 31, 2020. Full details on our results can be found at www.crombiereit.com and www.sedar.com.

FINANCIAL RESULTS

Crombie's key financial metrics for the three months ended March 31, 2021 are as follows:


Three months ended March 31,

(In thousands of CAD dollars, except per unit amounts and as otherwise noted)

2021

2020

Change

Change (%)

Property revenue

$

103,537


$

102,252


$

1,285

1.3

%

Property operating expenses

33,401


35,237


1,836

5.2

%

Net property income

$

70,136


$

67,015


$

3,121

4.7

%

Operating income attributable to Unitholders

$

33,215


$

21,324


$

11,891

55.8

%

Same-asset property cash NOI (1)

$

63,715


$

62,331


$

1,384

2.2

%

Funds from operations ("FFO") (1)





Basic

$

46,103


$

45,661


$

442

1.0

%

Per unit - Basic

$

0.29


$

0.29


$

%

Payout ratio(2)

76.4

%

76.0

%


0.4

%

Adjusted funds from operations ("AFFO") (1)





Basic

$

38,779


$

39,683


$

(904)

(2.3)

%

Per unit - Basic

$

0.25


$

0.26


$

(0.01)

(3.8)

%

Payout ratio

90.8

%

87.4

%


3.4

%

(1)

Same-asset property cash NOI, FFO and AFFO are non-GAAP financial measures used by management to evaluate Crombie's business performance. See "Cautionary Statements" below and refer to Crombie's March 31, 2021 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO.

Operating income attributable to Unitholders increased by $11,891, or 55.8%, compared to the first quarter of 2020 primarily due to the disposition of investment properties in 2021 with an increased gain on sale of $11,973 and bad debt expense decrease of $439. The growth in net property income was offset in part by an increase in general and administrative expenses of $2,019 resulting primarily from the higher unit price and its impact on unit-based compensation plans, and increased finance costs from operations of $821 primarily due to the addition of new mortgages and unsecured debt since the first quarter of 2020.

Same-asset property cash NOI (SANOI) increased by $1,384, or 2.2%, compared to the first quarter of 2020 primarily due to strong occupancy, higher supplemental rents from modernizations and capital improvements, lease termination income, and reduced bad debt expense. This was partially offset by a decrease in parking revenue of $789 as a result of reduced demand due to COVID-19. Adjusting for COVID-19 impacts as shown in the table below, SANOI for the first quarter was +3.8%.

The increase in FFO is primarily due to increased net property income (an increase of $3,121 for the quarter), which resulted from development and modernizations, lease termination income, and reduction in bad debt expense. This is offset in part by higher general and administrative costs and finance costs from operations as mentioned above.

The decrease in AFFO in the quarter is primarily due to the increase in general and administrative costs and finance costs from operations as mentioned above, and the loss from equity accounted investments of $771 compared to income of $115 in Q1 2020. This is partially offset by higher net property income of $3,121.

The following table further outlines what management estimates the material impacts of COVID-19 to be on Crombie's operating performance for the three months ended March 31, 2021:


FFO

AFFO

Same-asset
property
cash NOI

Same-asset
property NOI growth


$

Per unit

$

Per unit

$

$

Per unit

Actual results - Q1 2021

$

46,103

$

0.29

$

38,779

$

0.25

$

63,715

$

1,384

2.2

%

Adjusted for:








Bad debt expense

648

648

227

227

0.4

%

Parking revenue (1)

789

789

789

789

1.2

%

Adjusted results - Q1 2021

$

47,540

$

0.30

$

40,216

$

0.25

$

64,731

$

2,400

3.8

%

Actual results - Q1 2020

$

45,661

$

0.29

$

39,683

$

0.26

$

62,331



(1)

Parking revenue is calculated as the decrease in parking revenue from the same quarter in 2020, which Crombie has attributed to the impact of COVID-19.

Adjusting for COVID-19 impacts, Crombie's operating results were strong and on par with the first quarter of 2020.

OPERATING RESULTS


March 31,

2021

December 31,

2020

September 30,

2020

June 30,

2020

March 31,

2020

Number of investment properties (1)

287


284


286


286


285


Gross leasable area (2)

18,229,000


18,000,000


17,684,000


17,614,000


17,583,000


Economic occupancy (3)

95.5

%

94.0

%

94.7

%

95.1

%

95.5

%

Committed occupancy (4)

96.3

%

96.4

%

95.3

%

95.6

%

96.2

%

(1)

This includes properties owned at full and partial interests.

(2)

Gross leasable area is adjusted to reflect Crombie's proportionate interest in partially-owned properties.

(3)

Represents space currently under lease contract and rent has commenced.

(4)

Represents current economic occupancy plus completed lease contracts for future occupancy of currently available space.


March 31,

2021

December 31,

2020

September 30,

2020

June 30,

2020

March 31,

2020

Investment properties, fair value

$

4,877,000


$

4,815,000


$

4,615,000


$

4,604,000


$

4,519,000


Unencumbered investment properties (1)

$

1,388,141


$

1,366,258


$

1,460,152


$

1,461,970


$

1,479,211


Available liquidity (2)

$

469,548


$

471,708


$

370,885


$

406,303


$

449,898


Debt to gross fair value (3)

48.9

%

49.4

%

49.8

%

49.2

%

50.0

%

Weighted average interest rate (4)

3.88

%

3.89

%

4.05

%

4.05

%

4.06

%

Debt to trailing 12 months EBITDA (3)

9.80x

9.73x

9.34x

9.12x

8.86x

Interest coverage ratio (3)

3.04x

2.77x

3.03x

2.64x

3.18x

(1)

Represents fair value of unencumbered properties.

(2)

Represents the undrawn portion on the credit facilities, excluding joint facilities with joint operation partners.

(3)

See Debt Metrics section in the MD&A.

(4)

Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.

Operations and Leasing

During the quarter, economic occupancy was 95.5% along with strong committed occupancy of 96.3%. Crombie renewed 387,000 square feet with an increase of 3.0% over expiring rents during the quarter. New leases increased occupancy by 432,000 square feet at an average first year rate of $23.03 per square foot. Included in new leases is Empire's 300,000 square foot Voilà par IGA Customer Fulfilment Centre located in Montreal.

Development

Our first major mixed-use development, Davie Street, reached substantial completion during the first quarter of 2021. Davie Street, owned in partnership with Westbank, is located in Vancouver's West End neighbourhood and consists of 330 residential rental units in two towers.

Crombie segregates its pipeline by expected timing. Near-term projects are financially committed or expected to be committed within the next two years. Currently, Crombie has five developments classified as near-term projects. Upon completion, these projects will total approximately 214,000 square feet of commercial gross leasable area ("GLA"), 1,494,000 square feet of residential GLA and 2,027 residential units. The geographical breakdown of GLA is as follows: 594,000 in Vancouver; 148,000 in Victoria; 520,000 in the Greater Toronto Area; 267,000 in Montreal; and 179,000 in Halifax. Le Duke and Bronte Village are expected to reach substantial completion in 2021, with a remaining investment to complete of approximately $47,000. Our development projects are expected to create significant NAV and AFFO growth, while increasing our presence in Canada's top urban markets and diversifying and improving overall portfolio quality.

These estimates are subject to changes, as well as other development risks described in Crombie's first quarter MD&A under "Development" and "Risk Management".

Dispositions

During the first quarter, Crombie had gross proceeds of $41,970 from the disposition of three income-producing properties totalling approximately 30,000 square feet. These asset sales have been transacted in line with IFRS fair values and are part of Crombie's funding strategy, which redirects capital into developments that have the potential to deliver higher AFFO and NAV returns while at the same time improving portfolio quality.

Acquisitions

During the first quarter, Crombie completed seven transactions for total purchase price, before closing and transaction costs, of $46,292. This included a 100% interest in six retail assets totalling approximately 204,000 square feet and a 100% interest in vacant land in Burlington, Ontario for future development.

Empire appoints Jane Craighead as Trustee

Pursuant to ECL Developments Limited's right under Section 3.8 of Crombie's Amended and Restated Declaration of Trust to appoint up to five trustees, ECL Developments Limited ("ECL") has appointed Jane Craighead to Crombie's Board of Trustees effective May 10, 2021. ECL is a wholly owned subsidiary of Empire. Empire indirectly owns 41.5% of the outstanding Units and Special Voting Units of Crombie. Jane has over 20 years of experience with public company boards and over 30 years of experience in accounting and finance as well as eight years at Scotiabank as Senior Vice President, Global Human Resources. Ms. Craighead is a member of the board of directors of Intertape Polymer Group Inc. where she is a member of the ESG Committee and incoming chair of the HR Committee. She was a director of Clearwater Seafoods Incorporated from 2015 until its privatization in 2021 where she was the chair of the HR committee and previously a director of Park Lawn Corporation where she was chair of the investment committee.

Conference Call Invitation

Crombie will provide additional details concerning its period ended March 31, 2021 results on a conference call to be held Thursday, May 6, 2021, beginning at 11:30 a.m. Eastern Time. Accompanying the conference call will be a presentation that will be available on Crombie's website. To join this conference call, you may dial (416) 764-8688 or (888) 390-0546. You may also listen to a live audio webcast of the conference call by visiting the Investor section of Crombie's website located at www.crombiereit.com. Replay will be available until midnight May 13, 2021 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 732515 #, or on the Crombie website for 90 days after the meeting.

Cautionary Statements

Same-asset property cash NOI (SANOI), FFO, AFFO, EBITDA, AMR, available liquidity, and unencumbered investment properties are non-GAAP financial measures that do not have a standardized meaning under International Financial Reporting Standards ("IFRS"). These measures as computed by Crombie may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. Management includes these measures as they represent key performance indicators to management, and it believes certain investors use these measures as a means of assessing Crombie's financial performance. For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the three months ended March 31, 2021.

This news release contains forward-looking statements that reflect the current expectations of management of Crombie about Crombie's future results, performance, achievements, prospects, and opportunities. Wherever possible, words such as "may", "will", "estimate", "anticipate", "believe", "expect", "intend", and similar expressions have been used to identify these forward-looking statements. These statements reflect current beliefs and are based on information currently available to management of Crombie. Forward-looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2020 annual Management Discussion and Analysis under "Risk Management", could cause actual results, performance, achievements, prospects, or opportunities to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and a reader should not place undue reliance on the forward-looking statements. There can be no assurance that the expectations of management of Crombie will prove to be correct. Readers are cautioned that such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Crombie can give no assurance that actual results will be consistent with these forward-looking statements.

Specifically, this document includes, but is not limited to, forward-looking statements regarding:

(i) expected timing and costs of development and expected impact on NAV and AFFO growth for projects currently underway and planned into the future, which could be impacted by the economic impact of the COVID-19 crisis, ordinary real estate market cycles, the availability of labour, financing and the cost of any such financing, capital resource allocation decisions and general economic conditions, as well as development activities undertaken by related parties not under the direct control of Crombie.

Continuing uncertainty with respect to the severity, duration and overall impacts of the pandemic mean that forward-looking forecasts of operating and financial results for Crombie are uncertain at this time.

About Crombie REIT

Crombie Real Estate Trust ("Crombie") invests in quality real estate that enhances local communities and is adaptable to long-term growth. As one of the country's leading national retail property landlords, Crombie's portfolio includes grocery-anchored retail, shopping centres, industrial, and mixed-use developments in Canada's top urban and suburban markets. Crombie is an unincorporated, open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Learn more at www.crombiereit.com

SOURCE Crombie REIT

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